CENT Central Garden and Pet Co

Central Garden & Pet Company (NASDAQ: CENT/CENTA) today announced fourth quarter and full year results for its fiscal year ended September 25, 2010.

The Company reported net sales of $347 million in the quarter, a decrease of four percent compared to $363 million in the comparable fiscal 2009 period. For the quarter, the Company reported an operating loss of $4.6 million compared to operating income of $19.9 million in the year ago period. The net loss was $8.8 million, or $0.14 per fully diluted share, compared to a net income of $8.0 million, or $0.12 per fully diluted share, in the year ago period. The results for the quarter include a non-cash, pre-tax charge of $12.0 million related to the impairment of an intangible asset. Without the impairment charge, operating income would have been $7.4 million and the net loss for the quarter would have been $1.1 million, or $0.02 per fully diluted share. Sales of branded products decreased seven percent to $291 million and sales of other manufacturers’ products increased eight percent to $56 million. Depreciation and amortization was $7.2 million compared to $7.3 million in the year ago period. The quarter ending debt balance was $400 million compared to $408 million a year ago. The quarter ending Leverage Ratio, as defined in the Company’s credit agreement, was 2.57 times.

Net sales for the Garden Products segment in the quarter were $133 million, a decrease of 17 percent compared to $160 million in the comparable fiscal 2009 period. The operating loss for the Garden Products segment was $7.6 million, compared to operating income of $4.7 million in the year ago period. Sales of branded products decreased 18 percent to $117 million. Sales of other manufacturers’ products declined nine percent to $16 million. Net sales for the Pet Products segment in the quarter were $214 million, an increase of five percent compared to the year ago period. Operating income for the Pet Products segment was $12.9 million, compared to $27.6 million in the year ago period. Included in the Pet Products’ results for the quarter is the $12 million non-cash, pre-tax charge for the impairment of an intangible asset. Excluding this charge, operating income for the Pet Products segment would have been $24.9 million, a decrease of 10 percent compared to the year ago period. Sales of branded products increased three percent to $174 million. Sales of other manufacturers’ products increased 17 percent to $40 million.

For fiscal 2010, the Company reported net sales of $1,524 million, a decrease of six percent from $1,614 million in fiscal 2009. The operating income for the year was $109 million compared to $126 million in the prior year. The net income for the fiscal year was $45.8 million compared to $65.9 million in the prior year. The earnings per fully diluted share were $0.70 compared to $0.94 in the prior year. Included in the full year results is the non-cash, pre-tax charge of $12.0 million related to the impairment of an intangible asset. Excluding this charge, operating income would have been $121 million, and net income and earnings per fully diluted share would have been $53.5 million and $0.82, respectively. Sales of branded products decreased eight percent, while sales of other manufacturers’ products increased seven percent. Depreciation and amortization was $28.9 million for the fiscal year compared to $29.2 million in the prior year.

The Company will discuss its fourth quarter and fiscal 2010 results on a conference call today at 4:30 p.m. EST / 1:30 p.m. PST. Individuals may access the call by dialing 1-888-713-4213 and passcode 2013 4125 (domestic) or 1-617-213-4865 and passcode 2013 4125 (international).

The conference call will be simultaneously broadcast over the Internet through Central’s website, http://www.central.com/ or you may link directly to the webcast on our website at http://phx.corporate-ir.net/phoenix.zhtml?c=93879&p=irol-calendar. To listen to the webcast, please log on to the website prior to the scheduled call time to register and download any necessary audio software.

In order to simplify your registration process, you may pre-register at the following link: https://www.theconferencingservice.com/prereg/key.process?key=PXPR8NGUJ. By pre-registering, you may bypass the operator and go directly to the teleconference with a unique PIN number as soon as the call begins. At the time of the call, after dialing the number and passcode mentioned above, enter your PIN for immediate access to the teleconference.

Re-play dial-in numbers for the call will be available for three weeks: 1-888-286-8010 and passcode 6563 6856 (domestic) and 1-888-286-8010 and passcode 6563 6856 (international).

Central Garden & Pet Company is a leading innovator, marketer and producer of quality branded products for the lawn & garden and pet supplies markets. Committed to new product innovation, our products are sold to specialty independent and mass retailers. Participating categories in Lawn & Garden include: Grass seed and the brands PENNINGTON®, SMART SEEDTM and THE REBELS™; wild bird feed and the brand PENNINGTON®; weed and insect control and the brands AMDRO®, SEVIN®, IRONITE® and Over ‘N Out®; and decorative outdoor patio products and the brands NORCAL®, NEW ENGLAND POTTERY® and MATTHEWS FOUR SEASONS™. We also provide a host of other regional and application-specific garden brands and supplies. Participating categories in Pet include: Animal health and the brands ADAMS™ and ZODIAC®; aquatics and reptile and the brands OCEANIC®, AQUEON™ and ZILLA™; bird & small animal and the brands KAYTEE®, SUPER PET® and CRITTER TRAIL®; dog & cat and the brands TFH™, NYLABONE®, FOUR PAWS®, PINNACLE® and Avoderm®; and equine and the brands FARNAM®, BRONCO® and SUPER MASK®. We also provide a host of other application-specific Pet brands and supplies. Central Garden & Pet Company is based in Walnut Creek, California, and has approximately 4,300 employees, primarily in North America and Europe. For additional information on Central Garden & Pet Company, including access to the Company's SEC filings, please visit the Company’s website at www.central.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Central’s Annual Report on Form 10-K, filed November 20, 2009, and Quarterly Report on Form 10-Q, filed August 5, 2010, and other Securities and Exchange Commission filings. Central undertakes no obligation to publicly update these forward-looking statements to reflect new information, subsequent events or otherwise.

   

CENTRAL GARDEN & PET COMPANY

CONSOLIDATED BALANCE SHEETS

            September 25,2010 September 26,2009 (in thousands)

ASSETS

Current assets: Cash and cash equivalents $ 91,460 $ 85,668 Short term investments 15,320 — Accounts receivable, net 192,422 206,565 Inventories 285,964 284,834 Prepaid expenses, deferred income taxes and other   42,733     44,425   Total current assets 627,899 621,492 Land, buildings, improvements and equipment: Land 8,925 8,925 Buildings and improvements 95,664 95,711 Transportation equipment 4,031 3,734 Machinery and warehouse equipment 150,215 142,051 Office furniture and equipment   91,294     87,160   Total. 350,129 337,581 Less accumulated depreciation and amortization   (184,848 )   (172,847 ) Land, buildings, improvements and equipment–net 165,281 164,734 Goodwill 207,319 207,749 Other intangible assets, net 86,798 103,366 Deferred income taxes and other assets   43,587     53,584  

Total

$ 1,130,884   $ 1,150,925     LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 112,611 $ 108,836 Accrued expenses 81,418 82,143 Current portion of long-term debt   165     3,270   Total current liabilities 194,194 194,249 Long-term debt 400,106 404,815 Other long-term obligations 4,441 4,526   Commitments and contingencies  

Equity:

Common stock 163 188 Class A common stock 437 475 Class B stock 16 16 Additional paid-in capital 483,817 531,300 Retained earnings 45,319 12,044 Accumulated other comprehensive income   944     1,062   Total Central Garden & Pet shareholders’ equity   530,696     545,085   Noncontrolling interest   1,447     2,250   Total equity   532,143     547,335     Total $ 1,130,884   $ 1,150,925      

Central Garden & Pet Company

 

Condensed Consolidated Statements of Operations

 

(Unaudited)

(In thousands, except per share amounts)

                            Three Months Ended Fiscal Year Ended September 25,   September 26, September 25,   September 26,   2010     2009     2010       2009     Net sales $ 346,990 $ 363,171 $ 1,523,648 $ 1,614,300 Cost of goods sold and occupancy   243,556     246,933     1,008,482     1,086,974   Gross profit 103,434 116,238 515,166 527,326 Selling, general and administrative expenses 96,043 96,312 394,092 401,340 Goodwill and other impairments   12,000     -     12,000     -   Income (loss) from operations (4,609 ) 19,926 109,074 125,986 Interest expense (9,151 ) (4,864 ) (33,706 ) (22,710 ) Interest income 107 35 119 649 Other income (loss)   (9 )   (28 )   419     52   Income (loss) before income taxes and noncontrolling interest (13,662 ) 15,069 75,906 103,977 Income taxes (tax benefit)   (4,916 )   6,870     28,110     36,368   Income (loss) including noncontrolling interest (8,746 ) 8,199 47,796 67,609 Net income attributable to noncontrolling interest   20     163     1,963     1,661   Net income (loss) attributable to Central Garden & Pet Company $ (8,766 ) $ 8,036   $ 45,833   $ 65,948     Net income (loss) per share attributable to Central Garden & Pet Company: Basic $ (0.14 ) $ 0.12 $ 0.71 $ 0.95 Diluted $ (0.14 ) $ 0.12 $ 0.70 $ 0.94   Weighted average shares used in the computation of net income (loss) per share: Basic 62,476 68,502 64,272 69,499 Diluted 62,476 69,768 65,091 70,264

Non-GAAP Financial Measures

This press release includes adjustments to operating income (loss), GAAP net income (loss), and earnings per share for the fourth quarter and fiscal year ended September 25, 2010. Adjusted operating income (loss), net income (loss) and adjusted earnings per share, are non-GAAP financial measures which exclude the impact of the impairment of an intangible asset. We believe that they are useful as supplemental measures in assessing the operating performance of our business. These measures are used by our management, including our chief operating decision maker, to evaluate business results. We exclude impairment charges which we believe are not representative of the on-going results of operations of our business and are not used to determine compliance with the financial covenants in our credit facility and indenture.

We provide this information to investors and other users of the financial statements, such as lenders, to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations. While management believes adjusted operating income (loss), net income (loss) and adjusted earnings per share are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be used in conjunction with those GAAP results.

Below is a reconciliation of this non-GAAP (unaudited) measure to net income (loss) for the fourth quarter and net income for the fiscal year ended September 25, 2010.

                Fourth Quarter         Fiscal 2010 Dollars     EPS Dollars     EPS (in millions) (in millions) Reconciliation of net loss to adjusted net income:  

Net income (loss), as reported

$ (8.8 ) $ (0.14 ) $ 45.8 $ 0.70  

Adjustment for impairment of an intangible asset, net of taxes

7.7 0.12

7.7

0.12         Adjusted net income (loss) $ (1.1 ) $ ( 0.02 ) $ 53.5 $ 0.82    

Below is a reconciliation of this non-GAAP measure (unaudited) to the total Company’s operating income (loss) for the fourth quarter and fiscal year ended September 25, 2010.

                Fourth Quarter         Fiscal 2010 Dollars     Margin Dollars     Margin (in millions) (in millions) Reconciliation of total Company operating income:  

Operating income (loss), as reported

$ (4.6 ) (1.3 ) % $ 109.1 7.2 %  

Adjustment for impairment of an intangible asset

12.0 3.4 %

12.0

0.7 %         Adjusted operating income (loss) $ 7.4   2.1 % $ 121.1 7.9 %    

Below is a reconciliation of this non-GAAP measure (unaudited) to the Pet Segment’s operating income (loss) for the fourth quarter and fiscal year ended September 25, 2010.

                Fourth Quarter         Fiscal 2010 Dollars     Margin Dollars     Margin (in millions) (in millions) Reconciliation of Pet Segment’s operating income:  

Operating income (loss), as reported

$ 12.9 6.0 % $ 97.9 11.6 %  

Adjustment for impairment of an intangible asset

12.0 5.6 %

12.0

1.5 %         Adjusted operating income (loss) $ 24.9 11.6 % $ 109.9 13.1 %